Thursday, July 12, 2012

Energy shortage needs urgent response: Survey

A UN agency
has suggested Nepal to urgently respond to the severe energy shortages to boost
growth.
"Severe energy shortages require urgent response and widespread poverty
continues to remain a major long-term development challenge in South Asia
including Nepal," according to Economic and Social Survey of Asia and the
Pacific 2012 of the UN's Economic and Social Commission for Asia and the
Pacific (ESCAP).
"Regarding physical infrastructure, several countries in the subregion,
like Nepal, Bangladesh and Pakistan, are facing severe electricity
shortages," it said, suggesting the establishment of viable new power
projects, minimising transmission and distribution losses including theft of
electricity, increasing exploration of natural gas, crude oil and coal, tapping
of regional markets and setting up infrastructure for energy imports and
incentivising the development of renewable energy resources.
"The private sector's involvement should be encouraged along with the
public-private-partnerships approach due to limited public resources,"
said the flagship publication of ESCAP — the regional arm of the UN — providing
policy options for the government to overcome challenges and maintain the
pursuit of inclusive and sustainable development.
It has also prescribed the implementation of economic reforms to improve
productivity, strengthen public institutions, improve economic governance and
build social safety nets to protect the more vulnerable segments of the
population to fight against poverty.
"To promote more inclusive growth, the provision of basic services like
health care and education should remain the principal priorities in the policy
agendas," it said, adding that generating ample employment opportunities
is key for the poor to earn a livelihood.
However, inflation remains stubbornly high in Nepal as it is closely linked to
inflation in India because of the fixed exchange rates between the currencies
of the two neighbours as well as the close economic ties between them, it said,
adding that inflation remained close to a double digit, 9.6 per cent in
2010-11. "Weak supply of food items kept inflation high while at the same
time, the cost of production of both agricultural and industrial products rose
due to severe electricity shortages and rising labour wages stemming from the
overseas migration of Nepali workers."
It has, however, expected higher GDP growth in 2012. "Slow growth in Nepal
in recent years has largely been due to political instability, frequent
strikes, persistent labour problems and severe electricity shortages," it
pointed out, adding that GDP growth slowed to 3.5 per cent in fiscal year 2010-11
as compared to four per cent in fiscal year 2009-10. "The country's
agriculture performance improved due to favourable weather conditions but its
industrial and services sectors recorded lower growth rates."
However, the survey projected GDP growth to be about 4.5 per cent in fiscal
year 2011-12. "Economic revival in the country largely hinges on improved
law and order, as poor security and political instability limit the
government's capacity to spend money and boost rural income," it noted,
Growing tax revenue in Nepal led to an improvement in the country's tax-to-GDP
ratio, which was higher than 14 per cent in 2010-11, according to the survey.
Similarly, current account deficit also narrowed in fiscal year 2010-11. But
remittance from Nepali migrant workers played a major and positive role in
keeping the economy afloat.
"Despite, large merchandise trade deficit, remittance helped cushion the
shock," it concluded, estimating that the establishment of South Asian
Migration Commission could help formulate the framework for a coherent and
comprehensive response.